James B. Tyler Mary Ann Hartman James F. Durfee Edward A. Johnson Andrew L. Solow v. Henry Cisneros, Secretary, United States Department of Housing and Urban Development City and County of San Francisco, a Municipal Corporation Mission Housing Development Corporation, a California Corporation 1010 Svn Associates, a California Limited Partnership California Department of Parks and Recreation Vincent Marsh, Secretary, San Francisco Landmarks Preservation Advisory Board

Citations: 136 F.3d 603; 98 Daily Journal DAR 1394; 98 Cal. Daily Op. Serv. 1013; 28 Envtl. L. Rep. (Envtl. Law Inst.) 20540; 1998 U.S. App. LEXIS 1813Docket: 97-15005

Court: Court of Appeals for the Ninth Circuit; February 9, 1998; Federal Appellate Court

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James B. Tyler and other homeowners in San Francisco are appealing after a district court denied their request for a preliminary injunction against a low-income housing project funded by the Department of Housing and Urban Development (HUD). The plaintiffs argue that HUD and other defendants, including the City and County of San Francisco and Mission Housing Development Corporation, failed to comply with a Memorandum of Agreement intended to mitigate the project's impact on their homes, which are largely eligible for the National Register of Historic Places. Their claims are based on the National Historic Preservation Act (NHPA) and the National Environmental Policy Act (NEPA). The district court dismissed the case, stating that the claims were moot due to HUD's disbursement of funds to the local agency. The appeals court, however, concluded that it has jurisdiction to review the case and reversed the district court's decision, remanding it for further proceedings. The background establishes that Mission Housing planned the project to replace fire-damaged buildings, receiving federal funding that includes environmental review requirements. The City assumed compliance responsibility for the HOME funds, while HUD retained it for the HOPWA funds.

The City and HUD conducted reviews of a housing project under the National Historic Preservation Act (NHPA) and the National Environmental Policy Act (NEPA). The NHPA review indicated potential adverse impacts on properties eligible for the National Register of Historic Places. To mitigate these impacts, the City and HUD entered a Memorandum of Agreement with the Advisory Council on Historic Preservation and the State of California, incorporating public objections to maintain compatibility with local historic qualities. Concurrently, during the NEPA review, an environmental assessment was prepared, recommending the Agreement as a project approval condition. This led to the publication of a Notice of Finding of No Significant Impact (FONSI), stating that no environmental impact statement was necessary due to the mitigation measures. HUD issued its own FONSI regarding HOPWA funds, which also included the Agreement as a condition for approval.

Subsequently, the City certified its compliance with NEPA and NHPA and requested the release of HOME funds, which were granted after HUD reviewed comments related to the FONSIs. Between November 1995 and July 1996, Mission Housing submitted architectural plans that faced objections from plaintiffs, who sought changes to reduce neighborhood incompatibility, but the plans were approved.

On August 23, 1996, plaintiffs filed a lawsuit in the U.S. District Court for the Northern District of California against HUD, the City, and Mission Housing, alleging violations of NHPA, NEPA, the Administrative Procedure Act (APA), the Due Process Clause of the Fourteenth Amendment, and 42 U.S.C. § 1983. They sought a preliminary injunction to halt project activities. The district court denied the injunction and granted motions to dismiss, ruling that NHPA claims were moot due to an "implicit statute of limitations" preventing claims after HUD released the funds. Even without this limitation, the court found plaintiffs' claims would fail since HUD no longer had "continuing authority" over the funds.

The district court found the plaintiffs' NEPA claims moot because HUD no longer had authority over the Van Ness Project after disbursing HOPWA funds. For HOME funds, the court ruled that NEPA enforcement actions against HUD must occur within the fifteen-day comment period before fund allocation; since the plaintiffs filed their lawsuit post-period and HUD lacked continuing authority over these funds, this claim was also dismissed as moot. Additionally, claims against the City, acting as a delegatee for environmental review under the HOME program, were dismissed.

In reviewing dismissals for failure to state a claim, the district court's decision is subject to de novo review, requiring that complaints be favorably construed for the plaintiff, allowing for every reasonable inference. The court can affirm on any supported ground in the record.

Regarding NHPA claims, the district court determined that Section 106 implies an "implicit statute of limitations," as it mandates federal agencies to assess projects' impacts before approving federal funding. Consequently, once HUD approves project funding or a grant contract is entered into, the federal agency's responsibilities under NHPA are considered concluded, barring subsequent lawsuits.

The district court's ruling was challenged regarding the existence of an "implicit statute of limitations" that would prevent plaintiffs from filing suit after federal funds are disbursed. The cited cases do not support this notion; rather, they address the applicability of the National Historic Preservation Act (NHPA) concerning properties that became eligible after federal funding was allocated. In *Morris County Trust*, the Third Circuit determined that Section 106 applied when HUD provided funding after the NHPA was amended to cover the site in question. Similarly, in *WATCH*, the Second Circuit ruled that Section 106 was applicable when a property was eligible for the National Register before HUD's final funding approval. Conversely, in *Hart*, the Tenth Circuit found that Section 106 did not apply if a property was ineligible until after federal funding was finalized.

A more logical interpretation of Section 106 indicates that its "prior to" language pertains to the timing of agency compliance with NHPA requirements, not the timing for plaintiffs to initiate lawsuits. Section 106 mandates that an agency must complete the NHPA review before approving federal funding, thus framing the review timeline, not the plaintiffs' timeframe for legal action. This interpretation aligns with the rulings in *Morris County*, *WATCH*, and *Hart*, which focused on agency obligations rather than plaintiffs' claims being time-barred. 

Furthermore, interpreting Section 106 to impose a blanket prohibition on NHPA actions post-funding contradicts the recognized private right of action under the NHPA, as noted in *Boarhead Corp. v. Erickson*. If such a limitation existed, it could result in claims being dismissed as unripe before funding and as moot afterward, effectively eliminating the opportunity for private enforcement. The court has not recognized an implicit statute of limitations for NHPA claims post-fund disbursement, instead applying the doctrine of laches to assess the timeliness of claims under both NHPA and NEPA. In *Apache Survival Coalition v. United States*, the court applied laches to dismiss a suit filed two years after a permit was issued, emphasizing that the plaintiffs' lack of engagement in the Section 106 or NEPA processes was critical.

Ultimately, the district court erred in concluding that the NHPA contained an implicit statute of limitations. Additionally, the court found that even without such a limitation, the plaintiffs' claims were non-justiciable because HUD lacked continuing authority over the project to effectuate necessary changes to address the plaintiffs' concerns.

The document identifies errors in a previous holding regarding the authority of HUD under NEPA and NHPA regulations. It clarifies that HUD retains continuing authority due to its status as a party to the Agreement, emphasizing that an environmental impact statement under NEPA is considered adequate even without requiring agencies to mitigate adverse impacts or secure third-party assurances, as established in Robertson v. Methow Valley Citizens Council. Nonetheless, if an agency opts for mitigation measures, those must be implemented as per NEPA regulations, which mandate that conditions from the environmental impact statement be incorporated into approvals and funding.

The NHPA similarly obligates agencies that enter a Memorandum of Agreement to adhere to its terms, as illustrated by the Fourth Circuit's ruling in Waterford Citizens' Ass'n v. Reilly. Since the Agreement stipulates that signatories must consult if they believe its terms cannot be fulfilled, HUD is obligated to request such consultation if necessary. However, HUD's responsibilities are limited to the Agreement's terms, as the environmental review process is complete and unchallenged by plaintiffs.

On the issue of the City's liability as a delegatee, the district court incorrectly dismissed the plaintiffs' claims against the City concerning HOME funds, asserting that the City's responsibilities ended with the cessation of federal involvement. The relevant statute, 42 U.S.C. 12838(c)(4), indicates that local officials assume the role of a responsible federal official under NEPA, which includes jurisdiction for enforcement in federal courts. The district court’s narrow interpretation of 42 U.S.C. 12838, suggesting that a recipient's responsibilities terminate upon federal fund release, is also deemed erroneous, particularly as it overlooks the implications of devolving review responsibilities and monitoring duties.

The district court's interpretation of federal regulations was found to be incorrect, specifically regarding Title 24 C.F.R. 58.77(d), which mandates monitoring by federal agencies that delegate environmental review responsibilities. Although the plaintiffs did not allege HUD's failure to monitor, 24 C.F.R. 58.77(b) indicates that individuals seeking redress related to environmental reviews must address the responsible entity, not HUD, which implies that the grant recipient bears responsibility. Even if HUD approves a non-compliant project, the applicant remains accountable. 

While the City may face liability under federal law post-fund disbursement, its NEPA obligations are confined to adherence to the Agreement's terms, as the plaintiffs do not contest the legitimacy of pre-disbursement reviews. The plaintiffs claim the City violated a stipulation requiring it to consider public objections and consult with relevant parties within a specified timeframe. The district court is tasked with evaluating whether the City failed in this regard.

Regarding standing, the City argues that only signatories of the Agreement can enforce its terms, citing Citizens' Comm. for Envtl. Protection v. United States Coast Guard. However, since the public's right to object is explicitly referenced in the Agreement, the district court must assess whether this grants the plaintiffs standing to enforce the Agreement.

The district court's conclusion that the NHPA has an "implicit statute of limitations" and that plaintiffs' claims were moot due to HUD's limited authority was deemed erroneous. On remand, the court should first determine the plaintiffs' standing to enforce the Agreement, then evaluate the obligations of HUD and the City, and finally, decide on attorney's fees based on these findings. The State of California was dismissed as a defendant, and the plaintiffs did not appeal the dismissal of their APA, due process, and 42 U.S.C. § 1983 claims. Additionally, plaintiffs referenced a violation of NHPA regulations concerning property owners' participation in the review process, but this regulation pertains specifically to the Section 106 review, which concludes upon the Advisory Council's acceptance of the Memorandum of Agreement.